I have a friend who keeps his used band aids. My grandmother saved empty Chanel No. 5 bottles. Some things we save are sentimental: 3rd grade history essays, love letters from the neat guy we met on Spring Break 20 years ago, signed pictures of Corey Feldman.
In a world where we save so many things, how can we know what the really important things are?
We know that we should save car titles and mortgage statements, insurance papers and birth certificates. But what about our tax returns and back up documents?
At Bourke Accounting, this is one of the most frequently asked questions.
According to IRS.gov, you ought to “keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax.” There’s a very good reason for this. The IRS has a 3-year timeframe in which to audit a taxpayer. That’s also the timeframe allowed for a taxpayer to file an amended return.
However, according to usatoday.com, the IRS does have the power to go back as far as six years if a taxpayer “under-reported [their] gross income by 25 percent or more.”
In addition, if you didn’t file a return (or filed a fraudulent one) there is no statute of limitations. If this is the case, it’s been suggested that you should keep your records for as long as you can. As in, forever.
While the IRS and many other outlets suggest the 3-year rule, Forbes.com says that you “should retain every tax return you ever filed.” This is because, according to them, you can’t always be sure that your return didn’t get lost in the mail or that some other mishap didn’t befall your documentation. In addition, if the IRS has a question, they generally will request a copy of the return that was filed. Yes, the IRS has transcripts of returns, but it’s generally “easier to ask…for a copy instead of recovering it from the IRS’ storage.”
Before you consider building a new wing on your house to store every single one of these documents, don’t worry. Forbes.com says that a PDF file of your return is just as good as a hardcopy. Just make sure that you randomly back up your files onto an external device.
Bourke Accounting keeps records. Very good records, in fact. As a reputable tax preparing firm, Bourke Accounting can answer your questions regarding record retention, withholding payments and pretty much any financial question under the sun. Our Bourke Accounting experts know what’s important to save and what, like that 7-year old Chuck E. Cheese receipt, can be safely jettisoned. Give a call and see what Bourke Accounting can save for you.
Written by Sue H.